Editorial: Internet sales tax not geared to ‘other guy’

When an irresistible force — government demands for ever more money to spend — meets an immovable object — the reluctant taxpayer desperately trying to keep more of his hard-earned pay — something’s got to give.

And the objective is always to make the other guy do the giving.

So, there were few detractors and naysayers when the state of Nevada cut a deal with online retailer Amazon.com to collect sales on purchases by Nevadans starting Jan. 1. It seemed only fair that if so-called brick-and-mortar stores had to collect the sales tax, so should Amazon, which has warehouses in Nevada and supposedly benefits from state and local government services.

The rub is: Amazon does not pay the sales tax, it collects the sales tax from Nevadans, and Nevada Taxation Director Chris Nielsen estimated Nevadans will pay an additional $16 million in sales taxes on Amazon purchases. That will be in addition to what Amazon must add to its prices to cover the cost of collecting the sales tax.

Since the state already takes in nearly $1 billion a year from sales taxes — a hefty portion of which comes from purchases made by tourists — that $16 million will not break the bank.

The 1981 Nevada Legislature reduced property tax rates in what became known as the “Tax Shift,” in which cities and counties started to rely more on sales taxes. This was partly in response to California’s Proposition 13, capping property taxes, and partly a ploy to shift more of the burden of taxation on those tourists. Remember the eternal principle: Tax the other guy.

Pay no heed to the fact that sales taxes are both volatile and regressive. The amount of money raised by sales taxes varies wildly, depending on the state of the economy. But worse still is the fact those with the least income end up paying a disproportionate amount of that income in the form of sales taxes, while those with higher incomes pay a lesser percentage.

The Amazon grab took place despite the fact Nevadans voted in 2008 and again in 2010 overwhelmingly to reject ballot initiatives that would have made it easier for state lawmakers to quickly implement online sales taxes.

Amazon probably saw the writing on the courthouse wall. Earlier this month the U.S. Supreme Court declined to hear a New York case in which Amazon and others were fighting a decision by that state to tax Internet sales.

It is estimated that, if all Internet sales in Nevada were subject to the sales tax, the state would have collected an additional $330 million in tax revenue in 2012 — or, putting it another way, we Nevadans would have paid another $330 million in taxes.

The objective should never to be to find more ways to raise more taxes for government to spend, but to find more ways to reduce government spending, which will leave more money in the hands of individuals to spend productively and grow the economy, which, by the way, Mr. Bureaucrat, tends to generate more money for government to spend. – TM